Cost Audit

Cost AuditCost AuditLegal ProvisionsLegal Provisions

Maintenance of Cost Maintenance of Cost RecordsRecords

Section 209 (1) (d) deals with Section 209 (1) (d) deals with maintenance of cost maintenance of cost accounting records accounting records compulsorily by companies compulsorily by companies engaged in specified engaged in specified industries.industries.

Following records should be Following records should be maintained under Cost accounting maintained under Cost accounting Records Rules:Records Rules:

1.1. Records of raw materials, components, Records of raw materials, components, stores and spare parts.stores and spare parts.

2.2. Records for labour.Records for labour.

3.3. Records for overheads.Records for overheads.

4.4. Records for utilities/ services.Records for utilities/ services.

5.5. Records of Fixed Assets.Records of Fixed Assets.

6.6. Records for packing.Records for packing.

7.7. Records for research & Development.Records for research & Development.

Following records should be Following records should be maintained under Cost accounting maintained under Cost accounting Records Rules:Records Rules:

8.8. Records for by-product.Records for by-product.9.9. Records for WIP & Finished Goods.Records for WIP & Finished Goods.10.10. Records for Cost of Production.Records for Cost of Production.11.11. Computation of variance.Computation of variance.12.12. Statistical Data.Statistical Data.13.13. Records for Inter-company transaction.Records for Inter-company transaction.14.14. Records for depreciation, interest, Records for depreciation, interest,

packing expenses etc.packing expenses etc.

List of Industries/Products require List of Industries/Products require to maintain Cost Accounting to maintain Cost Accounting RecordsRecords

CementCement Bulk DrugsBulk Drugs TextilesTextiles TelecommunicationTelecommunication

CyclesCycles SugarSugar NylonNylon ElectricityElectricity

Tyres & Tyres & TubesTubes

Industrial Industrial AlcoholAlcohol

PolyesterPolyester Foot WearFoot Wear

Caustic Caustic SodsSods

Motor Motor VehiclesVehicles

RayonRayon Steel PlantSteel Plant

BatteriesBatteries Milk FoodMilk Food AluminumAluminum Plantation ProductPlantation Product

Electric Electric LampsLamps

Chemical Chemical IndustriesIndustries

BearingBearing CosmeticCosmetic

Audit of Cost Accounts U/s 233-Audit of Cost Accounts U/s 233-BB

1.1. Power to Order AuditPower to Order Audit

The Central Government derives the The Central Government derives the power to order any company falling power to order any company falling under section 209 (1) (d) to get cost under section 209 (1) (d) to get cost account audited by a Cost Accountant. account audited by a Cost Accountant. A Cost Accountant should be a Cost A Cost Accountant should be a Cost Accountant within the meaning of CWA Accountant within the meaning of CWA ACT,1949. CA may also carry out the ACT,1949. CA may also carry out the cost audit for a specified period if cost audit for a specified period if sufficient Cost Accountant are not sufficient Cost Accountant are not available. available.


2.2. AppointmentAppointment

The Cost Auditor shall be appointed by The Cost Auditor shall be appointed by the board of directors of the company the board of directors of the company with the prior approval of the Central with the prior approval of the Central Government.Government.

A written certificate shall be obtained A written certificate shall be obtained by the Board from the cost auditor by the Board from the cost auditor proposed to be appointed.proposed to be appointed.

Audit of Cost Accounts U/s 233-BAudit of Cost Accounts U/s 233-B

3.3. Addition to financial AuditAddition to financial Audit

Cost Audit is in addition to a financial Audit.

4. Powers and Duties

Cost Auditor shall have the same powers and general duties as are applicable to financial auditor of a company u/s 227(1).


5. Disqualification

A financial auditor cannot be appointed as a cost auditor of a same company.

All disqualification which are applicable to a financial auditor are also applicable to a cost auditor.


6.6. Company to AssistCompany to Assist

It shall be the duty of the company to give all facilities and assistance to the cost

auditor in the conduct of cost accounts/records.


7.7. Information & ExplanationInformation & Explanation

The company shall within 30 days of receipt of cost audit report furnish to

the Central Government full Information and Explanations on every qualification contained in the said report.


8.8. Further ExplanationFurther Explanation

The Central Government may, after considering the report, call for any further information or explanation from the company.


9.9. Necessary ActionNecessary Action

The Central Government may take The Central Government may take necessary action on the report in necessary action on the report in accordance with any law in force for the accordance with any law in force for the time being. time being.


10.10. Report to MemberReport to Member

The Central Government may direct the The Central Government may direct the company to circulate the cost audit company to circulate the cost audit report to its members, along with the report to its members, along with the notice for the annual general meeting.notice for the annual general meeting.


11.11. Penalties and PunishmentPenalties and Punishment

The company shall be punished with The company shall be punished with finefine which may extend to which may extend to Rs. 5,000Rs. 5,000 for for contravention of any provisionscontravention of any provisions of of section 233B. section 233B. Every officerEvery officer who is in who is in default shall be punished with default shall be punished with imprisonment up to imprisonment up to 3 years3 years or a or a fine fine up to Rs. 5,000 or with bothup to Rs. 5,000 or with both..

Cost Audit Report Rules-2001

These rules shall apply to every company in respect of which an audit of the cost accounting records has been ordered by the Central Government u/s 233B(1)

Form of Report

1. Every Cost Auditor shall submit the report ( a hard & soft copy) along with auditor’s observation and suggestions, annexure and pro-forma to the Central Government in the prescribed form and at the same time forward a copy of the report to the company.

Form of Report

2. Every Cost Auditor shall also give clarifications, if any, required by the Central Government on the Cost Audit Report submitted by him within 30 days of the receipt of the communication addressed to him calling for such clarifications

Form of Report

3.3. Every Cost Auditor shall also give Every Cost Auditor shall also give clarifications, if any, required by the clarifications, if any, required by the Central Government on the Cost Central Government on the Cost Audit Report submitted by him Audit Report submitted by him within within 30 days30 days of the receipt of the of the receipt of the communication addressed to him communication addressed to him calling for such clarifications.calling for such clarifications.

Form of Report

4.4. The electronic form shall be The electronic form shall be authenticated by the authorised authenticated by the authorised signatories using digital signatures, signatories using digital signatures, as defined under the Information as defined under the Information Technology Act, 2000.Technology Act, 2000.

Form of Report

5.5. The forms prescribed in these The forms prescribed in these rules, when filed in physical form, rules, when filed in physical form, may be authenticated by may be authenticated by authorised signatory by affixing authorised signatory by affixing his signature manually.his signature manually.

Time limit Time limit for submission of Reportfor submission of Report

The Cost Auditor shall forward his report The Cost Auditor shall forward his report to the Central Government and to the to the Central Government and to the concerned company within concerned company within 180 days 180 days from the close of the company’s from the close of the company’s financial yearfinancial year to which the report to which the report relates.relates.

Cost Accounting Record

• Without prejudice to the powers and duties the Cost Auditor shall have u/s 233B(1) of the Act, the company and every officer thereof, including the persons referred to in section 209 (6) of the Act, shall make available to the Cost Auditor with in 135 days from the close of the financial year of the company, such cost accounting records, cost statements, other books and documents, Annexure and Pro-forma to the Report, duly completed, as would be required for conducting the cost audit.

Authentication of annexure to the Cost Auditor

• The Annexure and pro-forma prescribed with the Cost Audit Report shall be approved by the Board of Directors before submitting the same to the Central Government by the Cost Auditor and also by the Company Secretary and at least one Director on behalf of the company.

PenaltiesPenalties

If default is made by the Cost If default is made by the Cost Auditor in complying with the Auditor in complying with the provisions of rule 4 or rule 5, he shall provisions of rule 4 or rule 5, he shall be punishable with fine, which may be punishable with fine, which may extend to Rs. 5,000.extend to Rs. 5,000.

PenaltiesPenalties If the company contravenes the provisions of If the company contravenes the provisions of

rule 6 or rule 7, the company and every officer rule 6 or rule 7, the company and every officer thereof who is in default, including the persons thereof who is in default, including the persons referred to in section 209(6) of the Act, shall, referred to in section 209(6) of the Act, shall, subject to the provisions of section 233B of the subject to the provisions of section 233B of the Act, be punishable with fine which may extend Act, be punishable with fine which may extend to Rs. 5,000 & where the contravention is a to Rs. 5,000 & where the contravention is a continuing one, with a further fine which may continuing one, with a further fine which may extend to Rs. 500 for every day after the first extend to Rs. 500 for every day after the first day during which such contravention continues. day during which such contravention continues.

Any Any QuestionsQuestions ? ?

Cost Audit

Documents

Transcript of Cost Audit